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Airbus

Airbus

By Philip Mattera

In 2014 the aerospace and military contracting giant that had been know by the cumbersome name European Aerospace, Defense and Space Company (EADS) rebranded itself as Airbus, the much better known name used by its civilian arm. EADS had gained a higher profile in 2008 when its partnership with Northrop Grumman was initially granted a massive U.S. Air Force contract for new refueling tanker planes (though after an uproar the award was given to Boeing instead). EADS—a major producer of civil and military helicopters, combat aircraft, missiles and space vehicles—has also been in the news in recent years because of controversies relating to insider trading and bribery. A plan to merge with BAE Systems collapsed in October 2012.

Insider Trading and Bribery

In mid-2006 a scandal emerged regarding EADS co-chief executive Noel Forgeard. French and German market regulators announced that they were looking into the timing of substantial sales of EADS stock by Forgeard and members of his family that occurred just before the company announced delays in the production of the Airbus A380 superjumbo jet. Forgeard initially claimed the timing was coincidental, but within a few weeks he was forced to resign, as was the head of Airbus, Gustav Humbert.

That did not put an end to the insider trading investigation. In December 2006 French police searched the Paris headquarters of EADS and that of its main French shareholder at the time, the Lagardère conglomerate. In April 2008 a formal complaint was filed against EADS as well as more than a dozen current and former executives. The following month preliminary charges were brought against Forgeard. Shortly thereafter, charges were also brought against EADS former deputy chief executive Jean-Paul Gut. In December 2009, however, French authorities concluded there was insufficient evidence against the executives.

Prior to the insider trading affair, EADS and/or Airbus had been named in numerous scandals around the world involving alleged bribery. A 2003 article in The Economist described a pattern of foreign bribes paid by Airbus throughout its history, noting that the French government tolerated such payments until 2000.

One of the most significant controversies occurred in Canada, where former Prime Minister Brian Mulroney was investigated over charges that he took bribes from German businessman Karlheinz Schreiber to induce Air Canada (then government controlled) to purchase $1.2 billion worth of Airbus planes in 1988. Mulroney denied the allegation vehemently and sued his own government, winning an apology and a cash settlement. The allegations were kept alive when Schreiber brought a civil suit against Mulroney, but Schreiber ended up making contradictory statements about the matter.

In December 2007 the government of India cancelled a $600 million order for military helicopters from Eurocopter after allegations that there had been corruption in the bidding process.

In June 2008 the Swedish government pension fund AP7 announced that EADS was one of the companies it was excluding from its portfolio because of involvement with nuclear weapons or cluster bombs.

In August 2012 it was reported that Britain’s Serious Fraud Office had launched a criminal probe of claims that a unit of EADS bribed officials in Saudi Arabia to win a $3 billion communications contract. The company asked PricewaterhouseCoopers to conduct a parallel investigation.

Product Safety

In January 2012 European air safety regulators ordered airlines to conduct inspections of nearly one-third of all Airbus A380 planes after hairline cracks were found in wing components of several of the super-jumbo jets.

In March 2005 the Federal Aviation Administration ordered U.S. airlines to inspect the rudders of certain Airbus jets after most of a rudder fell off an A310 in flight.

Human Rights

A 2007 Amnesty International report concerning the transfer of helicopters from India to the repressive government of Myanmar (Burma) mentioned (p.8) that a unit of EADS subsidiary Eurocopter was reported to be a supplier of helicopters to the Indian government, but Eurocopter did not respond to an inquiry from Amnesty on the issue.

Subsidies

The subsidies received by Airbus from European governments have long been criticized by the company’s U.S. rival Boeing, even though Boeing has received hundreds of millions of dollars in so-called economic development incentives from state and local governments. In July 2012 it was reported that Airbus would receive some $158 million of those same incentives for an assembly plant it agreed to build in Alabama. In December 2011 the European Union had announced that it was suspending subsidies to Airbus to comply with a World Trade Organization ruling.